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Target posts strong financial performance in Q2

15
Aug '12
Target Corporation reported second quarter net earnings of $704 million, or $1.06 per share. Adjusted earnings per share, a measure the company believes is useful in providing period-to-period comparisons of the results of its U.S. operations, were $1.12 in second quarter 2012, up 4.6 percent from $1.07 in 2011.

“We’re pleased with Target’s strong second quarter financial performance, which reflects a continued focus on delivering an outstanding experience for our guests and disciplined execution of our strategy,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation.

“In addition, we’re very pleased with the initial response to the July opening of our first three CityTarget locations in Seattle, Los Angeles and Chicago. We look forward to serving guests in these dense urban areas with an exciting store format and uniquely-tailored assortment.”

Fiscal 2012 Earnings Guidance

For third quarter 2012, the company expects adjusted EPS of $0.83 to $0.93 and GAAP EPS of $0.69 to $0.79.

For full-year 2012, the company has raised its guidance and now expects adjusted EPS of $4.65 to $4.85 and GAAP EPS of $4.20 to $4.40.

The difference between the GAAP and adjusted EPS range of 14 cents in the third quarter reflects the expected EPS impact of expenses related to the company’s Canadian market entry.

The difference between the GAAP and adjusted EPS range of 45 cents for the full year reflects the expected 50-cent EPS impact of expenses related to the company’s Canadian market entry, offset by the beneficial impact of the resolution of income tax matters recognized in first and second quarter 2012.

U.S. Retail Segment Results

As previously reported, sales increased 3.5 percent to $16.5 billion in second quarter 2012 from $15.9 billion last year, reflecting a 3.1 percent increase in comparable-store sales combined with the contribution from new stores.

Segment earnings before interest expense and income taxes (EBIT) were $1,181 million in the second quarter of 2012, an increase of 2.9 percent from $1,147 million in 2011. Second quarter EBITDA and EBIT margin rates were 10.2 percent and 7.2 percent, respectively, compared with 10.3 percent and 7.2 percent in 2011.

Second quarter gross margin rate declined to 31.3 percent in 2012 from 31.6 percent in 2011, reflecting the impact of the company’s integrated growth strategies partially offset by underlying rate improvements within categories. Second quarter selling, general and administrative (SG&A) expense rate was 21.1 percent in 2012 compared with 21.3 percent in 2011, reflecting disciplined control of expenses across the organization.

U.S. Credit Card Segment Results

Second quarter average receivables decreased 5.0 percent to $5.9 billion in 2012 from $6.2 billion in 2011. Second quarter 2012 portfolio spread to LIBOR was $140 million, or 9.5 percent, compared with $186 million, or 12.0 percent, in 2011. Performance in second quarter 2012 reflected a $30 million reduction in the allowance for doubtful accounts, compared with an $85 million reduction in second quarter 2011.


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